ARB Earnings: Profitability Accelerates, but Sales Growth Stalls

We raise our fair value estimate for shares in ARB by 6% to AUD 26 per share—principally due to the time value of money. First-half fiscal 2024 revenue was flat compared with the prior corresponding period. The 14% decline in export sales was offset by 4% growth in the Australian aftermarket and 54% growth in original equipment manufacturer sales. The loss of major U.S. customer 4 Wheel Parts due to a takeover is weighing on U.S. sales—ARB’s largest offshore market. OEM sales have recovered significantly with improving vehicle availability and increased volume within existing contracts amid new model launches. We think the Australian aftermarket is also largely tied to new vehicle sales, but industrial disputes across Australian ports are disrupting sales.